There's an old Shakespearean adage that says: "Neither a borrower, nor a lender be." Good advice indeed, especially on the borrowing side of the equation. Debt can destroy even the most financially savvy. It can be so addicting. The sheer sexiness of driving that new car, having the big LED 55" TV, and buy that new comfy bed is, well, intoxicating. But the reality of it is, it puts a humongous burden on you. You would be leagues better off if you saved and bought the product outright -- but that takes discipline. That's something that most Americans just simply do not have.
From our personal lives (our diet, nonexistent exercise regime, and penchant for watching TV), we find we don't have self resolve. We currently rank 9th in the world for obesity with a stunning 74% with a BMI over 30 (1). It's no wonder we carry that same blauzie faire attitude over into other parts of our lives. Additionally in the past thirty years, with the advent of the credit card, we see our attitudes have changed to the standard banking practice in the late 1970's and early 1980's of a 20% down payment on houses, and paying mostly in cash to the "I want it now because I deserve it." phenomenon.
You may want to give up. I understand that sentiment. I see people struggle with finances year in and year out. But you have to have a plan if you want to break the cycle. Cut up the cards - except your lowest rate one. Then take that card and put it in a glass filled with water. Put that in the freezer. This stops the urge to do online shopping. If you need it, you'll have wait a little for it to thaw.
Sit down with a spreadsheet and map out a repayment plan. It took you years to get into this fix. It will take several years to get out. You must be disciplined and stick to your plan. If not, you will end right back up where you are now, or worse. Banks are businesses. They plan to make a profit -- off of you!
So, look at your current balances. Stop spending and get a plan. Set up automatic minimum payments on all credit cards and see where you are cash flow wise. If you are just meeting the payments, you need more income. Easier said than done, I know. But there is no other options, unexpected events will occur and that will knock you off your plan. Do it. Take responsibility.
If you have some extra, don't pay down any cards until you have a savings buffer. Set up a savings account and put that extra in there until you have about $1,000. This is critical. Remember, unexpected things are going to occur and you have to have cash for that. Charging to your high rate credit cards is off the table. This may take up to a year to save this amount. You must remove temptation. Have a parent or someone that you trust, who is also financially sound? Make them a co-signer on the savings account and any withdraws must have dual signatures. This prevents the impulse buy.
Now that a buffer is established, start pounding away at that highest rate card. Put all your extra money against it each month. If you have a smaller balance with a very similar rate (within one percentage point), pay that one down first. Once that one is paid, push that payment against the highest rate.
It's not easy. I would never say that it is. But not trying, should not be an option.
(1) http://www.forbes.com/2007/02/07/worlds-fattest-countries-forbeslife-cx_ls_0208worldfat_2.html
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